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What is the CHOICERenovation Mortgage?

Freddie Mac has announced the creation of a new home renovation loan program called the CHOICERenovation Mortgage. This product is replacing Freddie Mac’s previous Renovation Mortgage and is very similar to Fannie Mae’s HomeStyle Renovation and the FHA’s 203k loan. It offers many benefits to borrowers looking to make updates to their properties.

How Does It Work?

The CHOICERenovation Mortgage breaks from its predecessor by eliminating the need for Interim Construction Finance and allows borrowers to take out one loan at closing to pay for both the home purchase and the proposed renovations or repairs. As more than 80% of the country’s homes are at least 20 years old and another 40% are more than 50 years old, Freddie Mac has realized that many homes will need serious updates in order to attract buyers. The CHOICERenovation Mortgage allows potential buyers to get those improvements done upfront with just one home loan.

The mortgage can take the form of a 30- or 15-year fixed loan or a 5/1 or 7/1 ARM, and the maximum loan amount can be as high as the super conforming limit in each county.

Who Can it Help?

CHOICERenovation Mortgages are designed to serve the needs of those who are buying a property (especially first-time buyers) as well as those who are already homeowners. It can also help multigenerational families who need to modify their homes for their unique living needs. This program can even be used to help those whose homes have been damaged by natural disasters and those who want to prevent damage from future natural disasters by securing the property with features like retaining walls, retrofitted foundations or storm surge barriers.

What are the Requirements?

The loaned money must be used to pay for renovations to an existing property, not to demolish the old one and rebuild a new home. It can also be used to fund title costs, appraisals, plan fees, permits and up to six months of mortgage payments. Loan proceeds may not be used for any items (other than appliances) that are not permanently attached to the property. CHOICERenovation Mortgages require that all planned renovations be completed within one year from the issuance of the loan.

Freddie Mac allows these mortgages to be used for 1-4 unit primary residences, single family second homes and investment properties, and manufactured homes.

LTV Ratios

The value of the property in these loans is determined as the lesser of the home purchase price plus renovation costs or the appraised value of the renovated home. If an existing loan is being refinanced with the program, the value is simply the appraised value after the updates or improvements. The CHOICERenovation Mortgage accepted loan-to-value ratios are as follows:

1-unit primary homes: 95%

2-unit primary homes: 85%

3- or 4-unit primary homes: 80%

1-unit second homes: 90%

1-unit investment properties: 85%

Manufactured homes: 95%

Those interested in learning more about the CHOICERenovation Mortgage program can visit www.freddiemac.com or give us a call today at 916-731-4405.